We examine how public liquidity should be distributed
to firms when immediate production
entails externalities, such as by spreading a virus. Direct provision of liquidity
can address externalities, but traditional distribution of liquidity (through banks)
has informational advantages. We show that which mode is preferred is determined
by the variance (but not the level) of firm characteristics in the economy. Traditional
provision is always part of the optimal policy when liquidity modes can be
combined, and involves promising low interest rates for when the pandemic is
over in order to incentivize temporary production shutdowns
Wolf Wagner is an economist specializing in public finance and banking. He has published in AEJ: Economic Policy, Journal of Finance, Journal of Financial Economics, among others.
Some information and suggestions:
- If you want to attend this online seminar, you need to register here. You will then be sent by email the details of the zoom session.
- Your microphone will be on mute upon joining the meeting, please leave it like that and unmute it only if you want to ask a question.
- Asking questions: please just go ahead and ask questions in the “usual way” (ie, don’t use the chat unless you want to notify me/host of any problem related to seminar.
- Please use the registration form to register for a Zoom bilateral on Monday. Note that slots are more limited than on a usual campus visit (and are open to UvA and VU as this is not a Rotterdam only seminar). If demand is high, meetings may be shorter than usual and priority will be given to PhD students and to colleagues for whom the meeting is more important/urgent.
- Please request a bilateral before Thursday 18 June, 09h00.